Sources inform ''Globes'' that Israel Corporation (TASE: ILCO) is seeking an investor for Tower Semiconductor Ltd. (Nasdaq: TSEM; TASE: TSEM) or else may sell its stake in the company. Israel Corp. is expected to pick an investment banker in a few weeks to help it find a suitable investor.
Israel Corp. owns 9% of Tower Semiconductor, making it the second largest shareholder in the company after SanDisk Corporation (Nasdaq:SNDK). If Israel Corp. closes a deal, it must comply with government restrictions. Under certain conditions, the government can demand the return of grants given to Tower Semiconductor, giving the government a kind of veto right over any potential deal.
Israel Corp. said in response, "Israel Corp. constantly considers strategic options concerning Tower Semiconductor. However, no concrete decision has been taken about a partner."
A hint that Tower Semiconductor may accept a new investor can be found in the company's financial report for 2007. Tower Semiconductor stated that if the grant application to finance expansion was rejected, the company would seek alternative external financing. In August 2008, the Investment Promotion Center notified the company that its application for more aid had been rejected.
Finding a new investor for Tower Semiconductor will not be easy, as it is not considered a particularly attractive investment. The company is still reporting losses, and banks have a lien on most of the company. Given the global credit and liquidity crisis, finding an investor willing to take a chance on a high-risk company will be difficult.
Tower Semiconductor's share has fallen 76% on Nasdaq since the beginning of 2008 to $0.33, giving it a market cap of just $41 million. Under the present circumstances, the company effectively belongs to its creditors, led by Bank Hapoalim (TASE: POLI; LSE:80OA) and Bank Leumi (TASE: LUMI).
Published by Globes [online], Israel business news - www.globes-online.com - on October 23, 2008
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